ECB maintains key interest rates amid stable inflation outlook

The European Central Bank's Governing Council decided on 5 February 2026 to keep its three key interest rates unchanged. This decision reflects an updated assessment that inflation should stabilize at its 2 percent target in the medium term, supported by a resilient economy.

Inflation on track, growth resilient

The Governing Council reconfirmed its commitment to ensuring inflation stabilizes at its 2 percent medium-term target.

In January 2026, headline inflation declined to 1.7 percent, down from 2.0 percent in December and 2.1 percent in November.

Energy inflation dropped significantly to -4.1 percent, while food price inflation increased to 2.7 percent.

Inflation excluding energy and food eased to 2.2 percent.

The euro area economy grew by 0.3 percent in the fourth quarter of 2025, driven mainly by services and supported by low unemployment and solid private sector balance sheets.

Public spending on defence and infrastructure is also underpinning growth, with business investment strengthening in digital technologies.

The Governing Council will follow a data-dependent and meeting-by-meeting approach, not pre-committing to a particular rate path.

Navigating global uncertainties and domestic calls

The economic outlook remains uncertain, primarily due to ongoing global trade policy uncertainty and geopolitical tensions.

The external environment is challenging, marked by higher tariffs and a stronger euro over the past year.

Despite these headwinds, the labor market continues to support incomes, with unemployment at 6.2 percent in December.

The Governing Council stressed the urgent need to strengthen the euro area economy, calling on governments to prioritize sustainable public finances, strategic investment, and growth-enhancing structural reforms.

Completing the savings and investments union and the banking union, alongside the rapid adoption of the digital euro regulation, are highlighted as crucial steps for fostering greater capital market integration and unlocking the full potential of the European Single Market.

Cautious hold in a volatile world

The ECB's decision to hold rates reflects a delicate balance between confidence in disinflation and persistent global uncertainties.

While headline inflation is nearing target, the detailed risk assessment reveals significant two-sided risks, making the data-dependent stance a necessity rather than a choice.

This bulletin underscores that despite stated resilience, the economic environment remains fragile, demanding continued vigilance and structural reforms beyond monetary policy.